Commissioner of Income Tax vs Godfray Phillips India Ltd.

B.P. Saraf, J.—By this reference u/s 256(1) of the income tax Act, 1961 (''the Act'') made at the instance of the revenue, the income tax Appellate Tribunal has referred the following questions of law for the opinion of this Court: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that in computing the disallowable expenditure in respect of the employee directors the limits u/s 40(c) and not those u/s 40(A)(5) are to be considered?

Whether, on the facts and in the circumstances of the case, the assessee was entitled to the claim that the share issue expenses of Rs. 29,021 was an expenditure u/s 37(1) of the IT Act, 1961?

It is fairly conceded by the counsel for the revenue that the first question is covered in favour of the assessee by the decision of this Court in Commissioner of Income Tax Vs. Hico Products (P.) Ltd., . In view of the above, we answer the first question in the affirmative and in favour of the assessee.

So far as second question is concerned, the learned counsel for the assessee pointed out to us that the expenditure in question is an expenditure of revenue nature. It is also pointed out to us that an issue of new shares was made by the assessee in the preceding assessment year as a result of the requirement of Government authorities under which dilution of foreign shareholdings was a prerequisite for carrying on of the Company''s business in India. The part of the expenditure in doing so was incurred in the preceding assessment year which was allowed by the Tribunal. The revenue did not come in reference against the said order. The amount claimed in this year is a part of the expenditure incurred in connection with the very same issue which was made in the preceding assessment year. The learned counsel submits that the expenditure was allowed in the preceding assessment year, following the ratio of the decision of this Court in Commissioner of Income Tax Vs. Glaxo Laboratories (India) Ltd., . In view of the above, we do not find any infirmity in the order of the Tribunal allowing the deduction claimed by the assessee in respect of expenditure of Rs. 29,021 in connection with the very same issue in this year also.

In view of the above, Question No. 2 is answered in the affirmative and in favour of the assessee. No order as to costs.